Bond markets are beginning the week in a defensive stance after insurance analysts report expected Irma-related losses to be lower than originally forecast.  Adding to the weakness is separate news that South Korea is supporting a full gamut of sanctions in the UN draft resolution against North Korea, including an oil embargo.  This is the sort of tough love seen as most likely to defuse North Korean tensions, relative to other options.

Bond weakness can also point to the future.  There is a round of Treasury auctions to begin the week with 3, 10, and 30yr tenors on Mon-Wed respectively.  At current levels, these will be the lowest-yielding auctions in nearly a year, thus potentially presenting a challenge for markets when it comes to garnering a meaningful bid.

For now, the weakness is doing unpleasant things to the technical outlook.  Once again, it calls the recent rally into question.  This time around, it's more serious because we have several salient fundamental justifications for the pull-back as well as one of the clearer technical signals we tend to get (seen in the chart below):

2017-9-11 Bounce

Bottom line, when yields successively touch or break below the lower Bollinger Band (the yellow lines in the chart) and then make a marked move back toward the middle band, it tends to be the start of at least a few days of negative momentum--frequently more.  Traders might not mind resetting the recent dominoes (i.e. pushing yields back up after the nice run lower) ahead of next week's big Fed Announcement.

Later this week, one of the most important economic reports of the month will come out.  Thursday morning brings the Consumer Price Index, which has arguably replaced NFP as the biggest potential market-mover in terms of economic data.  A big "miss" has the power to call the Fed outlook into question whereas any sort of "beat" would reinvigorate the Fed's tightening capabilities. 


MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
MBS
FNMA 3.5
103-21 : -0-06
Treasuries
10 YR
2.1114 : +0.0504
Pricing as of 9/11/17 8:48AMEST

Tomorrow's Economic Calendar
Time Event Period Forecast Prior
Monday, Sep 11
13:00 3-Yr Note Auction (bl) 24
Tuesday, Sep 12
13:00 10-yr Note Auction (bl)*
Wednesday, Sep 13
7:00 Mortgage Market Index w/e 420.5
8:30 Core Producer Prices YY (%)* Aug 2.1 1.8
8:30 Producer Prices (%) Aug 0.3 -0.1
13:00 30-Yr Bond Auction (bl)*
Thursday, Sep 14
8:30 CPI mm, sa (%)* Aug 0.3 0.1
8:30 Core CPI Year/Year (%)* Aug 1.6 1.7
8:30 Jobless Claims (k) w/e 300 298
Friday, Sep 15
8:30 Retail sales mm (%)* Aug 0.1 0.6
8:30 NY Fed manufacturing Sep 19.00 25.2
9:15 Industrial Production (%)* Aug 0.1 0.2
10:00 Consumer Sentiment Prelim Sep 95.1 96.8